Audit (Final Exam) 2022 Solved Correctly
What is audit evidence? -Ans- Defining characteristic between positive and negative
assurance
What are the five assertions when evaluating financial statements? -Ans- Existenc
...
Audit (Final Exam) 2022 Solved Correctly
What is audit evidence? -Ans- Defining characteristic between positive and negative
assurance
What are the five assertions when evaluating financial statements? -Ans- Existence
Completeness
Valuation
Rights and Obligations
Disclosure
What are the four steps of audit? -Ans- Assess risks
Test internal controls/Planning audit
Substantive audit evidence
Form conclusions
Which provides stronger evidence: Internal or External sources? -Ans- External
A lack of external evidence is considered to be...? -Ans- Unfavorable evidence
Why do auditors spend a lot of time in balance sheet? Does this detect fraudulent
expenditures or unearned revenue? -Ans- -Change(A-L) = Change(OE)
-No
-Not necessarily, example = gift cards (Liability)
Name an account at risk for over/under statement. What population should you select
for sample? -Ans- -Accounts Receivable (Test recorded AR balance)
-Accounts Payable (Look at companies you'' be paying them to, even if account is at
zero)
What was the point of the tangled giraffe's heads? -Ans- Looking at heads, down to the
bodies.
What is vouching? Purpose? -Ans- From account to entries to source documents, only
validity.
What is tracing? Purpose? -Ans- From source documents to account entries, tests
completion.
Name the seven types of audit evidence. -Ans- Observation
Physical examination
Inquires and interviews
Confirmations
Recalculations
Inspecting supporting documents (Vouching/Tracing)
Analytical procedures
Going through the motions is pointless, unless exercising what three character traits? -
Ans- Judgement
Common sense
Professional Skepticism
What is appropriateness? Example? -Ans- Doing the right thing
Vouching vs. Tracing
What is sufficiency? Example? -Ans- Doing enough
Sample size
MUST KNOW AUDITING ESTIMATES. Chapter 14. -AnsWhat factors should be considered when making auditing estimates. (3) -AnsReasonableness of assumptions
Consistency with industry standards
Consistency with actual experience over time is often the most reliable indicator
Current standards permit auditors to use one of these two estimate approaches. Which
is less biased? -Ans- 1. Test processes, inputs, and assumptions supporting the
company's estimate.
2. Develop an independent estimate or range and compare it to company's estimate.
2 - Because 1 anchors our judgement, and 2 is less susceptible to anchoring base.
Example a company that used intentionally poor estimates to cook books. -Ans- -Waste
Management increased the useful life's on trucks and garbage steel containers.
-Used odd discount rates for expenses on landfill SEC sued for 7 million
Five examples of related parties -Ans- -Subsidiaries
-Special Purpose Entities/Variable Interest Entities (SPG)
-Immediate family
-Majority Shareholder
-Managers/Executives
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